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Audit: Fairview generous to execs, but aggressive in collecting payments
by Tom Scheck, Minnesota Public Radio
January 31, 2005

Gail Nelson says she was hounded by collection agencies after undergoing cancer treatment at Fairview medical facilities. Nelson says she couldn't afford the $75,000 bill. AG Mike Hatch says Fairview should have considered her for their charity care program. (MPR Photo/Tom Scheck)

Fairview Health Services came under harsh criticism Monday from Attorney General Mike Hatch. As he has done following similar audits his office has done on other health systems, Hatch criticized Fairview's executive pay system. He also criticized Fairview executives for hiring collection agents to garnish bank accounts and wages if patients don't pay their bills. Fairview says it will examine the report and will consider Hatch's recommendations.

St. Paul, Minn. —
The five-volume report is Hatch's latest examination of Minnesota's nonprofit health industry. As attorney general, Hatch can audit any Minnesota nonprofit -- and he's been slowly looking into all of the large HMOs and hospital systems.

His audit of Allina four years ago forced the breakup of Allina and its HMO, Medica. In 2003, he criticized HealthPartners for having poor oversight of executive compensation.

After releasing the report on Fairview, Hatch says he's concerned that executives at all of the state's nonprofit health care systems are making more than the national average.

"You end up with this arms race, and you will see salaries escalate in health care far greater than any other sector," says Hatch.

Hatch's latest audit focused on what he characterized as lavish gifts, expensive trips and over-the-top dinners that Fairview gave its executives and board of directors in the 1990s through 2001. Hatch says Fairview changed those practices after he audited Allina in 2001.

In other parts of the audit, Hatch says he's concerned that Fairview's level of charity care is not in line with its mission as a nonprofit, and criticizes Fairview for agressive tactics by its collection agency.

Fairview operates seven hospitals and 50 clinics in Minnesota. Hatch says Fairview, which had total revenue of $1.6 billion in 2003, only provided $1.5 million in charity care during that same year.

"The boards have unfortunately become more focused on the executive care than the charity care -- and that's wrong. This is industry-wide. It is clearly industry-wide."

Hatch didn't detail charity care in any of his other audits of health care systems, but it's clear he's concerned about it.

There are some people who have care in our system who have the ability to pay the bills, and just don't pay them -- and there are others who really need our help. Trying to make that distinction is a difficult process.

- Fairview CEO David Page

During the news conference, Gail Nelson of Iron, Minnesota, said she was on MinnesotaCare when she went to Fairview for cancer treatment. Her state-subsidized plan stopped paying her medical bills when she went over the state-mandated cap. That left Nelson with a $75,000 bill, which she says she couldn't afford to pay. She says Fairview and a debt collection agent hired by Fairview continued to hound her.

"I asked her how did she think I was going to come up with thousands of dollars of medical bills? She continued to call me every week, and it was to the point where I wouldn't answer my phone any more," Nelson says.

Nelson ended up declaring for bankruptcy. Hatch says Nelson should have been the perfect candidate for charity care, where Fairview officials would have helped create an affordable payment plan.

The audit listed dozens of people who complained of Fairview's debt collection practices. In some instances, patients were incorrectly told they had to pay a bill, even though it should have been sent to their insurers. Other patients said they were billed for procedures they didn't receive. Others were targeted by debt collectors, even when they agreed to a payment plan with a hospital.

In total, the audit says Fairview referred 77,000 patient accounts to debt collection agents for legal action since 2001. Of that total, 4,500 patients received a summons or complaint by mail, and the collection agency filed 1,700 lawsuits against patients.

Fairview CEO David Page says he hasn't read the entire audit but says the company intends to make changes as a result of the findings. Page says Fairview continues to monitor its charity care policies, but needs to be cautious that the program is used only for those who absolutely need it.

"There are some people who have care in our system who have the ability to pay the bills, and just don't pay them -- and there are others who really need our help," says Page. "Trying to make that distinction is a difficult process."

Page says Fairview intends to review the debt collection practices at both the hospitals and through its debt collection agents. The audit says debt collection agents repeatedly garnished wages and bank accounts on patients, even when state and federal law didn't allow it. Page says the issue of charity care and debt collection practices need to be addressed on a nationwide level.

"We have an obligation to keep our economics in as solid a basis as we can. And from what the report seems to be indicating, there are areas where things have gone arwry, and we want to make sure that we identify all of those areas and correct them," Page says.

Both Fairview and Allina have been sued in U.S. District Court for not providing an adequate amount of charity care to patients. A judge will rule soon on whether the lawsuit can continue.

For his part, Hatch says he'll continue to audit the state's health care companies. He says his staff is already looking into Blue Cross/Blue Shield of Minnesota.